The government will apply both an income deduction and separate low-rate taxation on dividend income to long-term investors in the National Growth Fund. It will also roll out a new ISA dedicated to the domestic market with significantly expanded tax benefits compared with existing Individual Savings Accounts (ISA), to encourage long-term investment in local stocks.

The government on Jan. 9 unveiled a “productive finance promotion plan” containing these measures in its “2026 economic growth strategy”. The steps are designed to strengthen support for advanced industries and long-term investment in domestic stocks at the same time.

If investors put money for a certain period or longer into the public-participation National Growth Fund, scheduled to launch in the third quarter this year with a size of 600 billion won, they will receive an income deduction on the invested amount. Dividend income generated by the fund will be subject to separate low-rate taxation. Internally, a tax rate of 9 percent, or 9.9 percent including local tax, which was applied to the former New Deal Fund, or a lower rate is being discussed.

The government will also push a plan to raise the limit for recognizing loan-loss provisions as deductible expenses on those loan claims when financial firms and others supply funds to productive areas such as venture companies or policy funds.

To strengthen long-term investment in domestic stocks, a new “productive finance ISA” that can invest only in the domestic market will be introduced. Tax benefits will be increased significantly compared with existing ISAs, and eligible investments will be limited to domestic stocks and funds, the National Growth Fund and business development companies (BDC). Investments in overseas exchange-traded funds (ETF) will be excluded.

The first type of the new ISA, the “National Growth ISA”, will significantly expand tax benefits including the existing ISA tax-exempt limit of 2 million won, or 4 million won for the low-income version. A plan to remove the tax-exempt limit is also being discussed.

Another type, the “youth ISA”, will offer special tax treatment on interest and dividend income and income deductions on contributions for young people aged 19 to 34 with annual total pay of 75 million won or less. Youth ISA subscribers cannot also subscribe to the National Growth ISA or the youth future savings plan at the same time.

Tax benefits to be applied to the new ISA are expected to be reflected in a tax law amendment bill to be announced this year.